Dividend Stocks, Bonds And The Real Enemy

author name submits:David Nicklaus, one of the financial columnists who writes for the St. Louis Post-Dispatch, recently wrote an article chiding some investors for conflating savings accounts, CDs, and bonds with the highest quality dividend-paying stocks. In his argument, Nicklaus does make a point of distinction I agree with. Savings accounts are guaranteed by the federal government, and companies can lose value, stop paying a dividend, or go bankrupt. When you put $10,000 into your account at Commerce Bank (CBSH), there's no wipeout risk as long as the U.S. government remains solvent and the current laws on FDIC insurance remain in place. When you buy shares of Chevron (CVX), the price of oil could fall off a cliff, potentially forcing the company to stop paying its dividend. So I understand the point that Nicklaus is making. He has this to say in his article:
Rock-bottom rates on bonds and savings accounts haveComplete Story »

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By Larry Harnar:
It seems that many dividend stocks have been on a tear lately, largely due to investors trying to generate income and compensate for the rock bottom rates on savings accounts, CDs and bonds. Stocks with a long term history of growing their dividend have taken off and many have been at 52 week highs until the recent mild sell off.

Chuck Carnevale submits:As 2011 begins, the growing legion of investors seeking retirement income is faced with the same conundrum they faced in 2010. Interest rates remain at near all-time lows, and severely limit attractive investment options to meet income needs. After being traumatized by the great recession of 2008, safety and risk aversion are of the highest priority.

By Dividendinvestr:Treasury yields are extremely low. Income investors who were planning to live on the interest payments of their savings have had to find other alternatives to Treasury bonds or savings accounts. Dividend stocks offer higher yields and have the potential to increase dividend payments over the next 5-10 years. Unfortunately, dividend payments aren't guaranteed. That's why we prefer stocks that have strong profitability and market power when picking dividend stocks.

By The Financial Lexicon:As tens of millions of baby boomers approach retirement, investments deriving income will likely continue to be a hot topic. This might also be exacerbated by the fact that yields on savings accounts, money markets, FDIC insured certificates of deposit, and government bonds are near historic lows.

On February 14th — one month ago — we pondered “Long Bonds and Yen: Big Shorts for 2012?”
Japan’s currency (which we short circa Feb 14) has been in freefall the past four weeks, from 77 to 83 yen to the dollar. (As the yen declines in value, USDJPY rises.)
And now, this week, we may be seeing the long bond breakdown:

With interest rates continuing to hover at historically low levels, investors looking for income are understandably frustrated. Perhaps it should come as no surprise, then, that more people are recommending dividend stocks as an alternative to bonds, CDs, or even savings accounts. See here for an example. As such articles sometimes (but not always) point ...

Kevin Parker submits: The United States government and Federal Reserve have implemented a clear economic strategy of pushing money into stock markets via monetary policy. By lowering interest rates to near zero, the Fed has in essence forced money into risk assets.

Chuck Carnevale submits:As the baby boomer generation approaches their retirement years, their thirst for income-producing investments is extremely high. Finding quality investments that produce enough income to meet their retirement needs is a challenge. Fixed income investments, historically an important component of a balanced investment portfolio, are producing disappointing and even inadequate yields.

Chuck Carnevale submits:There is a running argument regarding whether or not dividend paying stocks are interchangeable for bonds. The pro-bond side argues in favor of the stability of bond prices and the predictability of bond interest. The pro-dividend paying stocks side argues in favor of the potential for increasing dividend income coupled with possible capital appreciation. In the end, it all comes down to the question of risk versus reward.

For-profit education companies have taken a pounding over the last few months. While bullish investors point to stable earnings and a growing need for vocational education, regulatory concerns have given the bears the upper hand.